If you are saving for retirement, then the question becomes “Are you saving enough?” Most experts suggest saving 15% of your salary for retirement and have six to ten times your annual salary saved for retirement. No one wants to be told to save more, but the reality is you are either saving for retirement today or you are consuming your retirement today. If you know you are not saving enough for retirement, why not start increasing the size of your nest egg today?
The good news is, it’s not complicated. It can be as simple as increasing the percentage you put toward retirement every month. If you are contributing 3% of your income to retirement, bump it to 5%. If you are contributing 7%, increase it to 9%. Some people may think they can’t afford to increase their retirement contributions, but most can. You may be surprised at how little of an impact retirement contributions have on your paycheck.
Take this scenario for example. Fred is 30 years old and earns $3,000 a month ($36,000 a year). He contributes 2% of his salary to his retirement account. He is on track to have $145,000 by age 65 when he plans to retire (assuming an 8% average return). After looking over his current financial savings, he realizes he is not saving enough and decides to increase his contribution by 3%. Due to tax savings, Fred’s contribution increase of 3% ($45 per paycheck, twice a month) will reduce his paycheck by only $41 and potentially improves his savings balance at retirement to $363,000. That is an increase of over $200,000!
Just think, by bringing your lunch to work every day rather than eating out, you can increase your retirement nest egg by an estimated $200,000. A little can go a long way. Your retirement dreams can become a reality.
Save as much as you can–your future self will thank you!